By Yoruk Bahceli and Padraic Halpin
DUBLIN (Reuters) -The vice chairman of big UBS shareholder BlackRock Philipp Hildebrand said on Thursday attention was now on how the bank positions itself going forward following its forced rescue of Credit Suisse last month.
Speaking about broader banking turmoil that also saw two U.S. lenders collapse in March, Hildebrand, whose firm is the world’s largest asset manager, said bank liquidity regulations would likely need to be revisited.
“The question now will be how does this settle, and how does UBS position itself going forward, given quite intense political discussions in Switzerland around competition, around size, and many other issues,” Hildebrand, a former chairman of the Swiss central bank, told a Bloomberg conference in Dublin.
UBS, Switzerland’s biggest bank, agreed in March to buy rival Credit Suisse for 3 billion Swiss francs in stock and to assume up to 5 billion francs in losses, in a merger engineered by Swiss authorities to avoid further turmoil in global banking developing into a broader crisis.
“This story is not over but the emphasis has now shifted to what UBS is going to do with it, as opposed to what the government did,” Hildebrand said. “I think the government handled it, under very difficult circumstances, very well.”
Speaking about broader banking turmoil, which has seen sizable deposit outflows in the United States, “there were some serious mistakes made in terms of strategy, in terms of risk management”, Hildebrand said.
“(We’re) going to have to say that our assumptions on liquidity were probably too optimistic and they came out of the 2008 crisis, that we’ll have to revisit that and I’m sure regulators will do that.”
Asked whether Credit Suisse’s rescue would lead to further bank consolidation in Europe, Hildebrand said there would be more focus on smaller U.S. banks.
He added that he was not “particularly worried” about a systematic problem in Europe’s banking system.
NO SOFT LANDING
On the global economy, Hildebrand said a recession would likely be necessary to tame inflation, but that he didn’t see any scenario where the U.S. Federal Reserve cuts interest rates this year as traders currently expect.
“The soft landing idea that’s been so embedded in people’s minds from the great moderation period, I don’t see that happening,” he said.
“Many people even in the markets have not quite understood in my mind how much we are now in a different (central bank) regime compared to the last four decades.”
Referring to the looming U.S. debt ceiling deadline, Hildebrand said the U.S. never having defaulted on its debt is a “basic anchor” of markets.
“All we can do I think, collectively… is to pray that everyone in the United States understands how important the sanctity of the sovereign signature of the leading currency, of the leading bond market, of the leading economy of the world is.”
(Reporting by Yoruk Bahceli and Padraic Halpin; Editing by Dhara Ranasinghe and Jan Harvey)
